US jobless claims fell below 2 lakh last week as layoffs stayed historically low

Fewer Americans applied for unemployment benefits last week, with layoffs remaining historically low despite signs of softening in the labour market.

US applications for jobless benefits for the week ended December 27 fell by 16,000 to 1.99 lakh, down from 2.15 lakh a week earlier, the Labor Department said on Wednesday.

Analysts polled by data firm FactSet had expected about 2.08 lakh new applications.

Weekly filings for unemployment aid can be volatile during holiday-shortened weeks, as some workers who lose jobs delay submitting claims. The report was released a day earlier than usual due to the New Year’s Day holiday.

Initial jobless claims are widely seen as a proxy for layoffs and provide a near real-time snapshot of labour market conditions.

Earlier this month, government data showed that the US economy added 64,000 jobs in November but shed 1.05 lakh jobs in October, largely due to a sharp fall in federal employment following spending cutbacks under the Trump administration. The weaker labour data pushed the unemployment rate up to 4.6% last month, the highest level since 2021.

October’s decline was driven by a drop of 1.62 lakh federal workers, many of whom exited at the end of fiscal year 2025 on September 30. Labour Department revisions also reduced payroll figures for August and September by a combined 33,000 jobs.

Recent data point to a labour market that has lost momentum amid uncertainty over President Donald Trump’s tariff policies and the lingering effects of high interest rates introduced by the Federal Reserve in 2022 and 2023 to curb inflation. Since March, job creation has averaged 35,000 a month, down from an average of 71,000 in the year ended March.

Earlier this month, the Federal Reserve cut its benchmark lending rate by 25 basis points, marking its third consecutive reduction. Fed Chair Jerome Powell said the move reflected concerns that the labour market may be weaker than headline figures suggest, adding that recent employment data could be revised lower by as much as 60,000 jobs. Such revisions would imply that employers have been shedding around 25,000 jobs a month since the spring.

Several large companies, including UPS, General Motors, Amazon and Verizon, have recently announced job cuts.

The Labor Department also reported that the four-week moving average of jobless claims, which smooths week-to-week volatility, rose by 1,750 to 2.19 lakh.

Meanwhile, the number of Americans continuing to receive unemployment benefits for the week ended December 20 fell by 47,000 to 1.87 million, the government said.